Life Insurance Corporation of India (LIC)’s Q3 reported a standalone net profit of Rs 6,334.2 crore in Q3FY23, up 27x y-o-y. This is a result of the transfer of Rs 5,670 crore from the non-par segment to shareholders’s accounts (related to accretion on available solvency margin). For 9MFY23, PAT grew 13.7x y-o-y to Rs 22,970 crore.
Annualised premium equivalent (APE) came in at Rs 12,320 crore in Q3FY23. Value-of-new-business (VNB) declined 21% y-o-y to Rs 1,800 crore as VNB margin moderated by 60bp q-o-q to 14.6% in Q3FY23.
The individual/group business constituted 62%/38% of APE, respectively, in 9MFY23. Within the individual business, the share of PAR products remained stable at 91%. In terms of new business premiums (NBP), the share of PAR products was lower at 66%. Annuity and ULIPs constituted the bulk of the residual with 24% and 7%. We expect the momentum to sustain in the medium term, led by incremental focus and introduction of new products.
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The sequential decline in VNB margin was a result of higher growth in the ULIP segment and re-pricing in the annuity products. Margin in the individual par segment improved to 11% from 10.6% in 1HFY23, while the same for non-par segment moderated to 63.6% from 68.7% in 1HFY23. Within the group segment, the margin moderated to 12.3% in 9MFY23. We now expect LICI to deliver a 15% CAGR in APE over FY23-25, thus enabling a 21% VNB CAGR. However, we expect operating RoEV to remain modest at 10.4%, given its lower margin profile than private peers.
LIC reported a 15% y-o-y growth in net premium, led by a 27%/6% growth in the new/renewal business. Total NBP grew 27% y-o-y to Rs 51,800 crore in Q3FY23, primarily led by 39% y-o-y growth in the group segment, while individual NBP reported a muted growth of 2% y-o-y. On an NBP basis, the share of PAR products moderated q-o-q to 66.4%. Term products contribute only 0.4%. Sales (Individual NBP) in the banca channel grew 48% y-o-y to Rs 1,360 crore in 9MFY23. This channel now contributes 3.5% of overall sales vs. 2.6% in 9MFY22. Incremental focus and a wider product offering will continue to drive higher sales from this channel.
Growth in agency channel was modest at 8% y-o-y to Rs 37,300 crore. However, LIC is continuously training the agents to sell non-par products. The persistency ratio saw mixed trends, with improvement in select cohorts. The impact of proposed changes due to tax treatment on maturity receipts stands minimal at 1.8% of APE. LIC has launched six new products in the non-par segments over 9MFY23 to increase the mix of such products.
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LIC is witnessing an increase in the mix of business by Banca and other channels. LIC will continue to scale up these channels. Within the non-par segment, ULIP business has grown at a higher pace.
LICI has all the levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments. However, changing gears for such a vast organisation requires a superior and a well-thought out execution plan.